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Airlines forecast to face deep losses into 2021

Airlines will continue to suffer deep losses into 2021 after the industry fought for survival in the face of the Covid-19 crisis.

The warning from Iata came as the collective industry was calculated to hit a loss of $118.5 billion this year against a figure of $84.3 billion forecast in June.

Passenger numbers are expected to plummet by 60.5% from 4.5 billion to 1.8 billion – roughly the same number that the industry carried in 2003.

An industry-wide net loss of $38.7 billion is expected next year – deeper than $15.8 billion previously projected.

The second half of 2021 is expected to see improvements after a difficult first six months.

Passenger numbers are expected to grow to 2.8 billion in 2021 – one billion more than this year but still 1.7 billion short of the 2019 performance.

“Aggressive cost-cutting is expected to combine with increased demand during 2021, due to the re-opening of borders with testing and/or the widespread availability of a vaccine, to see the industry turn cash-positive in the fourth quarter of 2021 which is earlier than previously forecast,” Iata said.

Director general and chief executive Alexandre de Juniac described the crisis as “devastating and unrelenting”.

He added: “Airlines have cut costs by 45.8%, but revenues are down 60.9%.

“The result is that airlines will lose $66 for every passenger carried this year for a total net loss of $118.5 billion.

“This loss will be reduced sharply by $80 billion in 2021. But the prospect of losing $38.7 billion next year is nothing to celebrate.

“We need to get borders safely re-opened without quarantine so that people will fly again. And with airlines expected to bleed cash at least until the fourth quarter of 2021 there is no time to lose.”

Airlines cut costs by $365 billion from $795 billion in 2019 to $430 billion in 2020 in the face of a half trillion-dollar revenue drop from $838 billion in 2019 to $328 billion, Iata calculated.

“The history books will record 2020 as the industry’s worst financial year, bar none,” de Juniac said. “Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up unprecedented losses.

“Were it not for the $173 billion in financial support by governments we would have seen bankruptcies on a massive scale.”

Airlines are still expected to burn an average of $6.8 billion a month during the first half of 2021, before the industry turns cash positive in the fourth quarter.

“The financial damage of this crisis is severe. Government support has kept airlines alive to this point,” de Juniac said.

“More is likely needed as the crisis is lasting longer than anyone could have anticipated. And it must come in forms that that do not increase the already high debt load which has ballooned to $651 billion.

“Bridging airlines to the recovery is one of the most important investments that governments can make. It will save jobs and kick-start the recovery in the travel and tourism sector which accounts for 10% of global GDP.”

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